Federal Acquisition Regulation; Prohibition on Contracting With Inverted Domestic Corporations, 38309-38310 [2015-16215]

Download as PDF Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Rules and Regulations Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804. IV. Regulatory Flexibility Act DoD, GSA, and NASA have prepared a Final Regulatory Flexibility Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The FRFA is summarized as follows: The purpose of this rule is to clarify that a determination of exceptional circumstances is needed when the period of performance, inclusive of options and modifications, of a noncompetitive contract awarded on the basis of unusual and compelling urgency is greater than one year. This rule only impacts the internal procedures of the Federal Government. There are no recordkeeping, reporting, or other compliance requirements associated with the rule. The rule does not duplicate, overlap, or conflict with any other Federal rules. No issues were raised by the public comments in response to the initial regulatory flexibility analysis. Interested parties may obtain a copy of the FRFA from the Regulatory Secretariat. The Regulatory Secretariat has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business Administration. V. Paperwork Reduction Act The rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35). List of Subject in CFR Part 6 Government procurement. * * * * (d) * * * (1) * * * (ii) May not exceed one year, including all options, unless the head of the agency determines that exceptional circumstances apply. This determination must be documented in the contract file. (2)(i) Any subsequent modification using this authority, which will extend the period of performance beyond one year under this same authority, requires a separate determination. This determination is only required if the cumulative period of performance using this authority exceeds one year. This requirement does not apply to the exercise of options previously addressed in the determination required at (d)(1)(ii) of this section. (ii) The determination shall be approved at the same level as the level to which the agency head authority in (d)(1)(ii) of this section is delegated. (3) The requirements in paragraphs (d)(1) and (d)(2) of this section shall apply to any contract in an amount greater than the simplified acquisition threshold. * * * * * [FR Doc. 2015–16210 Filed 7–1–15; 8:45 am] BILLING CODE 6820–EP–P statutory prohibition on the use of appropriated (or otherwise made available) funds for contracts with any foreign incorporated entity that is an inverted domestic corporation or any subsidiary of such entity. DATES: Effective: July 2, 2015. FOR FURTHER INFORMATION CONTACT: Mr. Michael O. Jackson, Procurement Analyst, at 202–208–4949 for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202–501–4755. Please cite FAC 2005–83, FAR Case 2014–017. SUPPLEMENTARY INFORMATION: I. Background DoD, GSA, and NASA published an interim rule in the Federal Register at 79 FR 74554 on December 15, 2014, to address the continuing Governmentwide statutory prohibition (in effect through annual appropriations acts since Fiscal Year 2008) on the use of appropriated (or otherwise made available) funds for contracts with any foreign incorporated entity that is an inverted domestic corporation (under section 835 of the Homeland Security Act of 2002, codified at 6 U.S.C. 395) or to any subsidiary of such entity. One respondent submitted comments in response to the interim rule. II. Discussion and Analysis The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the public comments in the development of the final rule. A. Summary of Significant Changes NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113. Jkt 235001 B. Analysis of Comments [FAC 2005–83; FAR Case 2014–017; Item V; Docket No. 2014–0017, Sequence No. 1] A discussion of the comments follows: 1. Deletion of References to the Specific Fiscal Years Comment: The respondent does not favor the deletion of references to the specific fiscal years covered in several subsections of FAR 9.108. The respondent states that the interim rule obscures the fact that the restrictions on contracting with inverted domestic corporations are fiscal year specific, and that those restrictions may or may not be enacted in future years. The respondent states that the interim rule now provides only a general description of the common exception language. The respondent recommends— Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). ACTION: Final rule. AGENCY: 2. Amend section 6.302–2 by— a. Removing from paragraph (d)(1) ‘‘contract awarded’’ and adding ‘‘contract awarded or modified’’ in its place; ■ b. Revising paragraph (d)(1)(ii); ■ c. Redesignating paragraphs (d)(2) through (d)(4) as paragraphs (d)(3) through (d)(5), respectively; ■ d. Adding a new paragraph (d)(2); and ■ ■ 48 CFR Parts 9 and 52 Federal Acquisition Regulation; Prohibition on Contracting With Inverted Domestic Corporations 1. The authority citation for 48 CFR part 6 continues to read as follows: ■ There were no changes made to the rule as a result of the comments received. There were no comments on the Regulatory Flexibility Act. RIN 9000–AM70 PART 6—COMPETITION REQUIREMENTS asabaliauskas on DSK5VPTVN1PROD with RULES Unusual and compelling urgency. * GENERAL SERVICES ADMINISTRATION Therefore, DoD, GSA, and NASA amend 48 CFR part 6 as set forth below: 21:24 Jul 01, 2015 6.302–2 DEPARTMENT OF DEFENSE Dated: June 18, 2015. William Clark, Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy. VerDate Sep<11>2014 e. Revising the newly designated paragraph (d)(3). The revisions and addition read as follows: ■ 38309 DoD, GSA, and NASA have adopted as final, without change, an interim rule amending the Federal Acquisition Regulation (FAR) to address the continuing Governmentwide SUMMARY: PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 E:\FR\FM\02JYR3.SGM 02JYR3 asabaliauskas on DSK5VPTVN1PROD with RULES 38310 Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Rules and Regulations Æ Specifically listing the covered fiscal years in the prohibition at FAR 9.108–2(a), the requirement for representation at 9.108–3, and the solicitation provision and contract clause prescriptions at 9.108–5; and Æ A separate listing at FAR 9.108–2(b) for the statutory exception for each fiscal year, e.g., for fiscal year 2008 ‘‘This prohibition does not apply when using Fiscal Year 2008 funds for any contract entered into before December 26, 2007, or for any order issued pursuant to such contract.’’ (This exception was then repeated for each fiscal year, inserting the date of enactment of the act). Response: Insofar as Congress has retained the Governmentwide statutory prohibition in place since Fiscal Year 2008, this interim rule amended FAR 9.108–2, 9.108–3, and 9.108–5 to reflect the ongoing nature of the prohibition for as long as Congress extends the prohibition in its current form through subsequent appropriations action (in full-year appropriations acts and in short-term and full-year CRs). Æ Because this prohibition is enacted in annual appropriations acts, the prior format of the regulation (listing all fiscal years) required annual update of the FAR to keep adding new fiscal years. Due to the required rulemaking process, this necessitated a substantial lag between enactment of the annual appropriations act and incorporation of the current fiscal year in the regulations. With the new approach in the interim rule, the FAR will only require revision if the requirements of the new appropriations act change. The prohibition at FAR 9.108–2 does make clear that the prohibition arises from section 745 of Division D of the Consolidated Appropriations Act, 2008 (Pub. L. 110–161) and its successor provisions in subsequent appropriations acts (and as extended in continuing resolutions). The Councils review the new appropriations act every year, and will take action to change the FAR if there is a change in the prohibition. Æ The interim rule provides an exact repetition of the common statutory exception language. Since the exception in each appropriations act is the same, the interim rule states the exception once: i.e., ‘‘Section 745 and its successor provisions include the following exception: This section shall not apply to any Federal Government contract entered into before the date of enactment of this Act, or to any task order issued pursuant to such contract.’’ Listing of each fiscal year exception separately was becoming repetitive and cumbersome. Whether the exception is listed separately for each fiscal year, or VerDate Sep<11>2014 21:24 Jul 01, 2015 Jkt 235001 is just stated once, seeking legal counsel is recommended if a contractor, during contract performance, becomes an inverted domestic corporation or a subsidiary of one. 2. Recommended Minimum Change Comment: The respondent recommended, at a minimum, that language should be added at FAR 9.108–3 and 9.108–5 to limit applicability to ‘‘fiscal periods for which Congress has enacted the prohibition described in Section 9.108– 2(a) above’’ and ‘‘When using appropriated funds from fiscal years for which Congress has enacted the prohibition described in section 9.108– 2(a) above,’’ respectively. Although this approach resolves the issue of requiring annual updates to the regulations, it imposes a burden on the many thousands of contracting officers to determine for which fiscal periods Congress has enacted the prohibitions. Response: The Councils have determined that this prohibition has been continuously applicable since FY 2008. As listed in the Federal Register, this required a review of 25 statutes. Not many FAR users will know which funds are tied to this restriction without further research. A contracting officer would not know whether to include the solicitation provision and contract clause without researching the appropriations act that appropriated the funds being used. It is more efficient for the Councils to make that determination, and ensure that the regulations appropriately reflect the requirement, without necessitating research by every contracting officer in the Federal Government. III. Executive Orders 12866 and 13563 Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804. PO 00000 Frm 00020 Fmt 4701 Sfmt 9990 IV. Regulatory Flexibility Act DoD, GSA, and NASA certify that this rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because this rule will only impact an offeror that is an inverted domestic corporation or a subsidiary of an inverted domestic corporation and wants to do business with the Government. The number of small entities impacted by this rule will be minimal. Small business concerns are unlikely to have been incorporated in the United States (or, if a partnership, established in the United States) and then subsequently incorporated in a foreign country; the major participants in these transactions are reportedly large multinational corporations. For the definition of ‘‘small business’’, the Regulatory Flexibility Act refers to the Small Business Act, which in turn allows the U.S. Small Business Administration (SBA) Administrator to specify detailed definitions or standards (5 U.S.C. 601(3) and 15 U.S.C. 632(a)). The SBA regulations at 13 CFR 121.105 discuss who is a small business: ‘‘(a)(1) Except for small agricultural cooperatives, a business concern eligible for assistance from SBA as a small business is a business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor’’. V. Paperwork Reduction Act The rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. Chapter 35). List of Subjects in 48 CFR Parts 9 and 52 Government procurement. Dated: June 18, 2015. William Clark, Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy. Interim Rule Adopted as Final Without Change Accordingly, the interim rule amending 48 CFR parts 9 and 52, which was published in the Federal Register at 79 FR 74554 on December 15, 2014, is adopted as a final rule without change. [FR Doc. 2015–16215 Filed 7–1–15; 8:45 am] BILLING CODE 6820–EP–P E:\FR\FM\02JYR3.SGM 02JYR3

Agencies

[Federal Register Volume 80, Number 127 (Thursday, July 2, 2015)]
[Rules and Regulations]
[Pages 38309-38310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16215]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 9 and 52

[FAC 2005-83; FAR Case 2014-017; Item V; Docket No. 2014-0017, Sequence 
No. 1]
RIN 9000-AM70


Federal Acquisition Regulation; Prohibition on Contracting With 
Inverted Domestic Corporations

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: DoD, GSA, and NASA have adopted as final, without change, an 
interim rule amending the Federal Acquisition Regulation (FAR) to 
address the continuing Governmentwide statutory prohibition on the use 
of appropriated (or otherwise made available) funds for contracts with 
any foreign incorporated entity that is an inverted domestic 
corporation or any subsidiary of such entity.

DATES: Effective: July 2, 2015.

FOR FURTHER INFORMATION CONTACT: Mr. Michael O. Jackson, Procurement 
Analyst, at 202-208-4949 for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAC 2005-83, FAR Case 2014-
017.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA published an interim rule in the Federal 
Register at 79 FR 74554 on December 15, 2014, to address the continuing 
Governmentwide statutory prohibition (in effect through annual 
appropriations acts since Fiscal Year 2008) on the use of appropriated 
(or otherwise made available) funds for contracts with any foreign 
incorporated entity that is an inverted domestic corporation (under 
section 835 of the Homeland Security Act of 2002, codified at 6 U.S.C. 
395) or to any subsidiary of such entity. One respondent submitted 
comments in response to the interim rule.

II. Discussion and Analysis

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the public comments in the 
development of the final rule.

A. Summary of Significant Changes

    There were no changes made to the rule as a result of the comments 
received. There were no comments on the Regulatory Flexibility Act.

B. Analysis of Comments

    A discussion of the comments follows:
1. Deletion of References to the Specific Fiscal Years
    Comment: The respondent does not favor the deletion of references 
to the specific fiscal years covered in several subsections of FAR 
9.108. The respondent states that the interim rule obscures the fact 
that the restrictions on contracting with inverted domestic 
corporations are fiscal year specific, and that those restrictions may 
or may not be enacted in future years. The respondent states that the 
interim rule now provides only a general description of the common 
exception language. The respondent recommends--

[[Page 38310]]

    [cir] Specifically listing the covered fiscal years in the 
prohibition at FAR 9.108-2(a), the requirement for representation at 
9.108-3, and the solicitation provision and contract clause 
prescriptions at 9.108-5; and
    [cir] A separate listing at FAR 9.108-2(b) for the statutory 
exception for each fiscal year, e.g., for fiscal year 2008 ``This 
prohibition does not apply when using Fiscal Year 2008 funds for any 
contract entered into before December 26, 2007, or for any order issued 
pursuant to such contract.'' (This exception was then repeated for each 
fiscal year, inserting the date of enactment of the act).
    Response: Insofar as Congress has retained the Governmentwide 
statutory prohibition in place since Fiscal Year 2008, this interim 
rule amended FAR 9.108-2, 9.108-3, and 9.108-5 to reflect the ongoing 
nature of the prohibition for as long as Congress extends the 
prohibition in its current form through subsequent appropriations 
action (in full-year appropriations acts and in short-term and full-
year CRs).
    [cir] Because this prohibition is enacted in annual appropriations 
acts, the prior format of the regulation (listing all fiscal years) 
required annual update of the FAR to keep adding new fiscal years. Due 
to the required rulemaking process, this necessitated a substantial lag 
between enactment of the annual appropriations act and incorporation of 
the current fiscal year in the regulations. With the new approach in 
the interim rule, the FAR will only require revision if the 
requirements of the new appropriations act change. The prohibition at 
FAR 9.108-2 does make clear that the prohibition arises from section 
745 of Division D of the Consolidated Appropriations Act, 2008 (Pub. L. 
110-161) and its successor provisions in subsequent appropriations acts 
(and as extended in continuing resolutions). The Councils review the 
new appropriations act every year, and will take action to change the 
FAR if there is a change in the prohibition.
    [cir] The interim rule provides an exact repetition of the common 
statutory exception language. Since the exception in each 
appropriations act is the same, the interim rule states the exception 
once: i.e., ``Section 745 and its successor provisions include the 
following exception: This section shall not apply to any Federal 
Government contract entered into before the date of enactment of this 
Act, or to any task order issued pursuant to such contract.'' Listing 
of each fiscal year exception separately was becoming repetitive and 
cumbersome. Whether the exception is listed separately for each fiscal 
year, or is just stated once, seeking legal counsel is recommended if a 
contractor, during contract performance, becomes an inverted domestic 
corporation or a subsidiary of one.
2. Recommended Minimum Change
    Comment: The respondent recommended, at a minimum, that language 
should be added at FAR 9.108-3 and 9.108-5 to limit applicability to 
``fiscal periods for which Congress has enacted the prohibition 
described in Section 9.108-2(a) above'' and ``When using appropriated 
funds from fiscal years for which Congress has enacted the prohibition 
described in section 9.108-2(a) above,'' respectively. Although this 
approach resolves the issue of requiring annual updates to the 
regulations, it imposes a burden on the many thousands of contracting 
officers to determine for which fiscal periods Congress has enacted the 
prohibitions.
    Response: The Councils have determined that this prohibition has 
been continuously applicable since FY 2008. As listed in the Federal 
Register, this required a review of 25 statutes. Not many FAR users 
will know which funds are tied to this restriction without further 
research. A contracting officer would not know whether to include the 
solicitation provision and contract clause without researching the 
appropriations act that appropriated the funds being used. It is more 
efficient for the Councils to make that determination, and ensure that 
the regulations appropriately reflect the requirement, without 
necessitating research by every contracting officer in the Federal 
Government.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

    DoD, GSA, and NASA certify that this rule will not have a 
significant economic impact on a substantial number of small entities 
within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et 
seq., because this rule will only impact an offeror that is an inverted 
domestic corporation or a subsidiary of an inverted domestic 
corporation and wants to do business with the Government. The number of 
small entities impacted by this rule will be minimal. Small business 
concerns are unlikely to have been incorporated in the United States 
(or, if a partnership, established in the United States) and then 
subsequently incorporated in a foreign country; the major participants 
in these transactions are reportedly large multinational corporations. 
For the definition of ``small business'', the Regulatory Flexibility 
Act refers to the Small Business Act, which in turn allows the U.S. 
Small Business Administration (SBA) Administrator to specify detailed 
definitions or standards (5 U.S.C. 601(3) and 15 U.S.C. 632(a)). The 
SBA regulations at 13 CFR 121.105 discuss who is a small business: 
``(a)(1) Except for small agricultural cooperatives, a business concern 
eligible for assistance from SBA as a small business is a business 
entity organized for profit, with a place of business located in the 
United States, and which operates primarily within the United States or 
which makes a significant contribution to the U.S. economy through 
payment of taxes or use of American products, materials or labor''.

V. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. Chapter 35).

List of Subjects in 48 CFR Parts 9 and 52

    Government procurement.

    Dated: June 18, 2015.
William Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

Interim Rule Adopted as Final Without Change

    Accordingly, the interim rule amending 48 CFR parts 9 and 52, which 
was published in the Federal Register at 79 FR 74554 on December 15, 
2014, is adopted as a final rule without change.

[FR Doc. 2015-16215 Filed 7-1-15; 8:45 am]
 BILLING CODE 6820-EP-P